We recently undertook a comprehensive survey of our portfolio companies’ option grants practices, allowing us to provide our companies with equity benchmarks for a range of roles at the Seed and Series A stages. In this blog, we are happy to share 5 takeaways from the data that can help early-stage founders across the ecosystem make better and more informed decisions about how to grant stock options to their employees.
1. Seed-stage companies are using equity flexibly as a tool for closing early employees.
We all know that early-stage companies, often lacking in cash and name recognition, need to find other ways to attract early employees. Common knowledge says that these companies often turn to large equity grants to compensate for lower salaries or higher risk. Our data confirms this practice for management-level hires and senior engineers, who often form the initial “core team.” In these role categories, we see generous grants with a high level of variation (some companies offering as much as 2.5% equity for leadership team hires and more than 0.5% ownership on average for senior engineers), suggesting a willingness to negotiate freely on a case-by-case basis and to give large grants to key candidates.
The Takeaway: If you’re thinking of bumping up an equity offer for a key early employee in order to seal the deal, you’re in good company.
2. Equity grants for more junior and non-technical hires tend to be more consistent, with more compact ranges.
While companies are offering large equity grants to certain types of early employees, they are giving more modest and much more standardized grants to most others. In particular, mid-level and junior engineers, as well as non-technical hires (marketing, GTM, HR, etc.), are receiving quite consistent grants, with less variation, across Seed and Series A companies. For instance, about 75% of companies surveyed give between 0.15% and 0.25% ownership on average to mid-level engineers at Seed stage. This consistency is likely because 1) these tend to be less “competitive” candidates who are easier to hire, 2) the company is more likely to be able to match their salary expectations, making equity grants less necessary to close the gap, and 3) companies may simply feel less pressure to close employee #6, 7, or 8, once the initial core hires have been made, making them less likely to negotiate on equity with these candidates.
The Takeaway: Most companies are sticking closely to benchmark averages and avoiding outsize grants for mid-level or non-technical hires at the Seed and A stages.
3. As companies grow, there’s a relatively small equity gap between engineers and non-engineers below the management level.
Despite the fact that engineers tend to earn significantly higher salaries than non-technical employees with similar experience levels, average equity grants tend to be similar between these two groups, especially for mid-level and junior hires and especially as companies move into later Seed or Series A stage. For instance, the average grant size for junior engineers at Seed stage is 0.08% versus 0.06% for junior non-technical roles. This suggests that most companies are keeping it simple by calculating their baseline option grants based on broad categories of seniority instead of tying them in a more complex way to base salary, which would replicate significant salary gaps into equity discrepancies. Another interesting implication: while the first few senior engineers tend to get larger, flexible option grants, we see grants for even senior engineers becoming more standardized as the company matures from Seed to A.
The Takeaway: There’s no need to overcomplicate your equity grants processes at the early stages – choose a baseline grant amount for seniority, regardless of role/salary, and negotiate with candidates from there.
4. Director-level technical leaders often receive as many options as management-level executives and far more than their director-level, non-technical peers.
At the early stages, especially Series A, many companies are starting to build out fuller leadership teams, especially on the non-technical/GTM side, and adding complexity to their engineering organization. The initial non-technical executives – VP Sales, Marketing, HR, CS, etc. – are often considered more “senior” than Directors of Engineering from a decision-making/leadership perspective, even though their compensation tends to be similar or lower and they often manage smaller teams. But, rather than this “seniority” gap manifesting in larger equity grants for non-technical executives, we actually see similar averages between these groups – both are between 0.45% and 0.5%. In contrast, non-technical, director-level employees receive significantly fewer options (closer to 0.2%) at Series A.
The Takeaway: When we get to the director or executive level, the gap between engineers and non-engineers widens. For these roles, you should expect option grants for technical directors to approach or match grants at the executive level, especially non-technical executives.
5. Equity benchmarks are inexact and should be taken with a grain of salt.
Whereas salaries are usually tied to verifiable market benchmarks and are more transparent, understanding the logic behind any individual option grant at an individual company usually requires understanding:
- The company’s overall approach to equity; generous vs. conservative
- The sample size – early-stage teams tend to be small, making averages highly sensitive to outliers
- How the company thinks about seniority, especially in flat organizations with limited management layers
- Whether the hiring process allows or encourages candidates to negotiate, especially on equity
- Whether the company presents equity in raw value terms as part of the overall compensation package
- Refreshes and additional grants given over time, which can be based on tenure, performance, promotion, dilution, and other factors
- How titles/roles in one company relate to similar roles in other companies
- The company’s hiring plans and equity pools, especially towards a fundraising round
Figuring out how to control for all of these variables in order to compare apples to apples across wildly different companies is difficult even for benchmarks that pull from huge data sets. Therefore, our survey, like many others, makes certain assumptions and simplifications in order to provide directional guidance.
The Takeaway: Option benchmarks can point you in the right direction, but can’t tell you how to incorporate your business goals, your priorities and culture, and your team into your equity strategy. If you tie yourself too tightly to benchmarks, you lose the flexibility that makes option grants a powerful tool for recruitment and retention.
At TLV Partners, we are committed to providing the tools, data, and best practices our teams need to grow and succeed. This is just one of a range of benchmarking projects that we have planned for 2025. We look forward to sharing more soon!
